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Liquid Alternatives Build on Big March Gain

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Liquid alternatives started the second quarter on a positive note as the Wilshire Liquid Alternative Index returned 0.6% in April, beating out the HFRX Global Hedge Fund Index’s 0.4% return.

Last month, the Wilshire index gained 1.5%. It is up 0.4% year to date but down 4.2% over the last 12 months.

In April, the liquid alternative relative value subindex, including credit, convertible arbitrage and volatility funds, was the top performer, up 1.4%, more than 50 basis points ahead of the HFRX relative value arbitrage index.

Wilshire noted in a statement that nearly every relative value credit manager recorded positive performance in April as credit spreads further tightened.

The liquid alternative event-driven subindex, incorporating credit, merger arbitrage and special situations funds, gained 0.4% in April, in line with the HFRX event-driven index’s return.

Wilshire said high yield credit and special situation strategies were the largest positive contributors, while merger arbitrage strategies underperformed as deal spreads widened in light of a more challenging regulatory environment.

The liquid alternative equity hedge subindex, which includes both long/short equity and market neutral funds, ended April up 0.2% for the month, 17 basis points ahead of the HFRX equity hedge index. Year to date, it is down 0.3%.

The liquid alternative global macro subindex, including systematic, discretionary, commodity and currency funds, suffered a 0.8% loss in April, and its performance for the year to date is flat.

“This was the second month in the row that the [subindex] was negative and as a result has turned many managers’ performance negative for 2016,” Wilshire Funds Management president Jason Schwarz said in a statement.

“Trends early on in the year have subsided and reversed in many asset classes. The U.S. dollar depreciated versus the Japanese yen, and equity markets have rallied on calmed fears of the ‘Brexit’ concern. Similar to last month, discretionary managers fared better than systematic managers.”

The Wilshire liquid alternative multi-strategy subindex, which includes both single and multi-manager funds, ended the month up 0.3%. It is down 0.7% for the year to date, and down 5.4% for the past 12 months.

The Wilshire Liquid Alternative Index family is a joint offering between Wilshire Funds Management, Wilshire Associates’ global investment management business and Wilshire Analytics, creator of the Wilshire 5000 Total Market Index.

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